Responses to Other Students: Respond to at least 2 of your fellow classmates with at least a 100-word reply about their Primary Task Response regarding items you found to be compelling and enlightening. To help you with your discussion, please consider the following questions:
What did you learn from your classmate’s posting?
What additional questions do you have after reading the posting?
What clarification do you need regarding the posting?
What differences or similarities do you see between your posting and other classmates postings
Dakota ODowd
For this unit 3 discussion board I was asked by a business owner who is concerned about their low revenue, to provide guidance on the timing of revenue recognition for each scenario they provided. To begin, for scenario A the business should record membership fees that are paid in advance but put a hold on it incase of cancelations, although this could really affect the financial statements because you never know how much you make from the overall membership account at the end of a year if you have a risk of loosing customers each month throughout. Secondly, scenario B provides non members a chance to purchase 25 coupons per year for kickboxing, spinning and aerobics classes; the business should record those coupon books as purchased and they do not need to hold anything because if the coupons expire that’s on the customer. This is very beneficial to the financial statement because they can record cash as soon as it is received and that’s all! Lastly for scenario C the business provides fitness machines with a 30% down and a 2-year payment plan with the chance of a full refund after 90 days, and I believe that the company should only record that cash is received after the 90 days incase someone wants their refund, and this can have its up’s and down’s when it comes to the financial statement because you can record it as cash received you just have to wait 3 months after the customer purchased the machine which slows down the process of recording. In conclusion, I believe that each scenario can have it’s own type of benefits to the company but I have come to learn that scenario B has the highest effective rate when it comes to recording cash as it is received on the financial statement without risk of change.Breezi Youngren
Attn: Jolly Fitness Club
There are three scenarios that have been brought to my attention. I will outline and discuss the following:
The membership fees are due in the beginning of the year and are collected in advance. They have 4 clubs in the vicinity, and the members can use any of these facilities. To attract more members, they also allow them to cancel the membership with a full refund for the unused months.
According to the Financial Accounting Rules Board (FASB) and GAAP, standards and guidelines are set and are expected to be followed. The practices being utilized here at Jolly Fitness go against the standards of practice set forth. Collecting the revenue and recording it before the customer has used the services, therefor the company is recording unearned revenue, goes against the standards of practice which state that all revenue must be recorded as it is earned. Refunding the money to customers for unused months also goes against GAAP and the FASB. There are certain conditions that must be met and followed per these policies and procedures. Unless the revenue is put in an unearned revenue account and held until the revenue has been accrued and then record it in the correct place at that point in time. This would insure that standards and met and that there is no issue if there is a refund because the revenue has not been recorded but instead “put to the side” in a sense.
Some customers only want to attend classes like kickboxing, spinning, and aerobics; they do not want to become members. Therefore, the club sells coupon books that have 25 coupons. If the customers do not use these coupons by the end of the year, they will expire.
This is actually a good idea. When a coupon book is sold it can be recorded as revenue. It gives a time of expiration and there is a set price. This revenue would be able to be recorded because there is no chance of a refund or any funds being moved around at a later date causing any issues.
Jolly Fitness also makes its own fitness machines. It sells these machines to the customers with 30% down and a 2-year payment plan. However, customers can return the machine with a full refund within 90 days. It also provides servicing on this equipment, and historically 6% of the machines sold will have repair services.
This again goes back to what was said in example A. The down payment will be put into unearned revenue along with the payments until after the initial 90-day period. After which the funds will then be moved and recorded as such for the duration going forward.
Each time a payment is put into unearned revenue it is kind of like a holding pattern. Each time money is moved from one area of the financial statements it needs to be reflected on the balance sheet and the income statement. Depending on what transaction has occurred will determine weather there will be a debit or credit to the correct financial documents.

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